Survey Of Accounting
5th Edition
ISBN: 9781259631122
Author: Edmonds, Thomas P.
Publisher: Mcgraw-hill Education,
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Textbook Question
Chapter 13, Problem 15E
Exercise 6-15A Segment elimination decision
Dudley Transport Company divides its operations into four divisions. A recent income statement for its West Division follows:
| DUDLEY TRANSPORT COMPANY West Division Income Statement for the Year 2019 |
|
| Revenue | $ 300,000 |
| Salaries for drivers | (210,000) |
| Fuel expenses | (30,000) |
| Insurance | (42,000) |
| Division-level facility-sustaining costs | (24,000) |
| Companywide facility-sustaining costs | (78,000) |
| Net loss | $ (84,000) |
Required
- a. Should West Division be eliminated? Support your answer by explaining how the division’s elimination would affect the net income of the company as a whole. By how much would companywide income increase or decrease?
- b. Assume that West Division is able to increase its revenue to $324,000 by raising its prices. Would this change the decision you made in Requirement a? Determine the amount of the increase or decrease that would occur in companywide net income if the segment were eliminated if revenue were $324,000.
- c. What is the minimum amount of revenue required to justify continuing the operation of West Division?
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Students have asked these similar questions
Exercise 14-22 (Algo) Compute Divisional Income (LO 14-1)
Arlington Clothing, Inc., shows the following information for its two divisions for year 1.
Lake Region
Coastal Region
Sales revenue
$
4,110,000
$
13,020,000
Cost of sales
2,666,300
6,510,000
Allocated corporate overhead
246,600
781,200
Other general and administration
548,900
3,750,000
Required:
a. Compute divisional operating income for the two divisions. Ignore taxes.
Vernon transport company divides its operations into four divisions. A recent statement for its West Division folows
Vernon Transport Comapny Wesy division Income Statement for year 3
Revenue $670,000
Salaries for drivers (520,000)
Fuel expenses (67,000)
Insurance (87,000)
Division-level facility- sustaining costs (57,000)
Companywide facility-sustaining costs (147,000)
Net loss $208,000
Required
a) By how much would cormpanywide income increase or decrease if West Division is estimated? Should West Division be eliminated?
b) assume that West Division is able to increase its revenue to $760,000 by raising its prices. Determine the amount of the increase or decrease that would occur in companywide net income if the segemnt were eliminated. Should West Division be eliminated if revenue were $760,000?
c) What is the mininum amount of revenue required to Jusify continuing the operation of West Divison?
Complete this question by entering your answer in the table below.
Income Would…
Divisional income statements with support department allocations
Horton Technology has two divisions, Consumer and Commercial, and two corporate support departments, Tech Services and Purchasing. The corporate expenses for the year ended December 31, 20Y7, are
as follows:
Tech Services Department
$1,158,300
480,000
Purchasing Department
Other corporate administrative expenses
704,000
$2,342,300
Total expense
The other corporate administrative expenses include officers' salaries and other expenses required by the corporation. The Tech Services Department allocates costs to the divisions based on the number of
computers in the department, and the Purchasing Department allocates costs to the divisions based on the number of purchase orders for each department. The services used by the two divisions are as
follows:
Consumer Division
Commercial Division
Total
Tech Services
500 computers
310
810 computers
Purchasing
5,600 purchase orders
10,400
16,000 purchase orders
The support department…
Chapter 13 Solutions
Survey Of Accounting
Ch. 13 - Prob. 1QCh. 13 - Prob. 2QCh. 13 - Prob. 3QCh. 13 - Prob. 4QCh. 13 - Prob. 5QCh. 13 - Prob. 6QCh. 13 - Prob. 7QCh. 13 - Prob. 8QCh. 13 - Prob. 9QCh. 13 - Prob. 10Q
Ch. 13 - Prob. 11QCh. 13 - Prob. 12QCh. 13 - Prob. 13QCh. 13 - Prob. 14QCh. 13 - Prob. 15QCh. 13 - Prob. 16QCh. 13 - Prob. 17QCh. 13 - Prob. 18QCh. 13 - Prob. 19QCh. 13 - Prob. 1ECh. 13 - Prob. 2ECh. 13 - Prob. 3ECh. 13 - Prob. 4ECh. 13 - Exercise 6-5AOpportunity costs Norman Dowd owns...Ch. 13 - Prob. 6ECh. 13 - Prob. 7ECh. 13 - Prob. 8ECh. 13 - Prob. 9ECh. 13 - Prob. 10ECh. 13 - Exercise 6-11AEstablishing price for an...Ch. 13 - Exercise 6-12AOutsourcing decision with...Ch. 13 - Exercise 6-13AOutsourcing decision affected by...Ch. 13 - Prob. 14ECh. 13 - Exercise 6-15ASegment elimination decision Dudley...Ch. 13 - Prob. 16ECh. 13 - Exercise 6-17AAsset replacementopportunity cost...Ch. 13 - Prob. 18ECh. 13 - Exercise 6-19A Asset replacement decision Mead...Ch. 13 - Exercise 6-20A Asset replacement decision Kahn...Ch. 13 - Exercise 6-21A Annual versus cumulative data for...Ch. 13 - Problem 6-23A Context-sensitive relevance Required...Ch. 13 - Problem 6-24A Context-sensitive relevance...Ch. 13 - Problem 6-25A Effect of order quantity on special...Ch. 13 - Problem 6-26A Effects of the level of production...Ch. 13 - Problem 6-28A Eliminating a segment Western Boot...Ch. 13 - Effect of activity level and opportunity cost on...Ch. 13 - Problem 6-30A Comprehensive problem including...Ch. 13 - Prob. 29PCh. 13 - ATC 6-1 Business Application Case Analyzing...Ch. 13 - ATC 6-2 Group Assignment Relevance and cost...Ch. 13 - Prob. 3ATCCh. 13 - Prob. 4ATCCh. 13 - Prob. 5ATC
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